GBP/JPY’s longer-term range is still holding for now, as the pair is having trouble breaking past resistance right below the 154.00 major psychological level. Stochastic has shown a bearish divergence, hinting at a move down south.
Shorting at market and aiming for the bottom of the range at the 149.00 area would still yield a decent reward-to-risk, as stochastic is still headed down. Setting a stop above the top of the range or above the 154.00 mark might be enough to weather the volatility of this pair.
However, it might be prudent to risk a smaller amount on this trade as fundamentals are currently in conflict with technical signals. Note that the UK economy has shown several impressive improvements recently and that the revised second quarter GDP is up for release while Japan is dealing with weak data and the possibility of lower spending due to higher tax rates.
By Kate Curtis from Trader’s Way